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Updated January 30, 2023
U.S. Trade Policy: Background and Current Issues
Congress has primary authority over U.S. trade policy
Figure 1. U.S. Goods and Services Trade
through its constitutional power to levy tariffs and regulate
foreign commerce (Article 1, §8). It has delegated some
trade authorities to the Executive branch, but retains an
active role in formulating trade policy and shaping
outcomes. Since World War II, U.S. trade policy has
generally sought to advance U.S. economic growth and
competitiveness by: reducing international trade and
investment barriers; fostering an open, transparent, and
nondiscriminatory rules-based trading system, including
through the World Trade Organization (WTO); enforcing
partner countries’ trade commitments and U.S. trade laws;
and offering relief to U.S. workers and firms adversely
affected by “unfair” foreign trade practices and trade
Source: Bureau of Economic Analysis and Census Bureau.
liberalization. Legislative efforts in the 117th Congress
aimed to boost U.S. innovation, production and supply
Key Components of U.S. Trade Policy
chain resiliency in strategic sectors, and restrict certain
Congress sets U.S. trade negotiating objectives, enacts trade
trade with the People’s Republic of China (PRC or China)
laws, programs, and agreements, and oversees executive
and Russia (e.g., through sanctions). Congress also
trade functions conducted by a range of federal agencies.
deliberated issues such as its role in trade negotiations,
By statute, the U.S. Trade Representative (USTR) is the
tariffs, and trade preference programs.
lead U.S. trade negotiator and coordinates trade policy
Trade Economics and U.S. Trade Trends through an interagency process, with formal public and
private advisory input. Key policy components include
Economic theory generally shows that free trade is
Trade rules-setting, liberalization, and enforcement.
beneficial at the national level though the benefits and costs
Negotiation of trade agreements to open markets and set
of trade liberalization may be unevenly distributed in a
rules on trade and investment; enforcement of
country. Under this theory, countries produce and export
commitments via dispute settlement and U.S. trade laws.
goods and services in which they have a higher relative
Export promotion and controls. U.S. support for export
comparative advantage, and import those domestically
financing, market research, advocacy, and trade
unavailable or less efficiently produced. This assumes that
missions; licensing and control of strategic exports.
countries take a market-oriented approach, abide by similar
Customs, trade remedies and adjustment. Regulation of
rules, and offer reciprocal market access. Benefits of trade
borders; laws to address adverse effects of imports,
can include higher wages and job growth, a wider variety of
national security threats, balance of payments, tariff and
products available at lower prices, increased productivity
nontariff trade barriers, imports made with forced labor;
such as in export-focused industries, and more efficient
assistance for dislocated workers and firms.
resource allocation from competition and economies of
Trade preferences. Duty-free access to U.S. market for
scale. Costs of trade liberalization can include some job and
eligible developing countries and products, intended to
firm losses, and wage declines, through import competition
encourage trade and spur their economic growth.
and production relocation. These benefits and costs can
Investment. Protection and promotion through
vary by industry. The economic impact of trade
investment treaties and trade agreements; examination
liberalization is difficult to measure and widely debated, in
of inbound investment for national security implications.
part because of the many factors that influence economic
activity. Most economists agree that trade liberalization
Selected Issues and Developments
benefits the U.S. economy overall, but that it has
In its trade policy, the Biden Administration has sought to
adjustment costs for certain sectors and regions. Workers
strengthen the U.S. economy by aiming to boost U.S.
and firms may require more assistance and dedicated
manufacturing, innovation and competitiveness, and
policies to adjust to trade effects.
advance labor and environmental goals. It also has sought
to enforce trade agreements, work with allies and partners
The United States plays a leading role in global trade and
to address trade frictions, and counter and constrain actions
investment. U.S. trade has expanded in recent decades (see
of concern by China and Russia, among other aims.
Figure 1), and the U.S. economy has become more
integrated globally. Since 2020, U.S. and global trade
U.S. Trade Laws. Authorities to adjust tariffs and other
trends have reflected ongoing COVID-19 pandemic and
restrictions have been active in U.S. trade policy. Examples
economic recovery effects. The top U.S. trading partners
include laws to address unfairly traded goods (e.g.,
(goods and services, exports plus imports) in 2021 were, as
antidumping and countervailing duty laws); import injury
a bloc, the European Union (EU, $1,097 billion), and by
from fairly traded goods, and foreign trade barriers or trade
country, Canada ($763 bn), Mexico ($726 bn), China ($719
commitment violations (Sec. 201 and Sec. 301 of the Trade
bn), Japan ($279 bn), and Germany ($268 bn). The United
Act of 1974, respectively); and trade-related national
States has a long-running overall trade deficit (imports
security concerns (Sec. 232 of the Trade Expansion Act of
exceed exports); the goods trade deficit outweighs the
1962). The Trump Administration renewed use of some of
services trade surplus. Most economists hold that macro-
these authorities, to counter subsidies by applying tariffs on
economic variables affect the deficit more than trade policy.
certain steel and aluminum imports from most trading
https://crsreports.congress.gov
U.S. Trade Policy: Background and Current Issues
partners, including China (Sec. 232), and on most imports
Hemisphere through “mini” bilateral trade deals with Brazil
from China in response to its practices of concern (Sec.
and Ecuador on trade facilitation, regulatory cooperation,
301). U.S. trading partners imposed counter-tariffs and
and anti-corruption. It also launched FTA talks with the
launched WTO cases. The Biden Administration has kept
EU, UK, and Kenya, but did not reach agreements.
many restrictions but lifted some or reached less restrictive
arrangements, e.g., with the EU, Japan, and United
The Biden Administration has focused on “a worker-
Kingdom (UK).
centered trade policy that fosters inclusive prosperity,” and
not on restarting pending talks or new FTAs. It launched a
Trade Promotion Authority (TPA). Congress and the
bilateral Trade and Technology Council (TTC) with the EU
President generally work together to negotiate and
to cooperate on bilateral and global issues (e.g., standards,
implement U.S. trade agreements. Since the Reciprocal
digital trade, export controls, and nonmarket economy
Trade Agreements Act of 1934, Congress has periodically
concerns); the TTC has been key in joint trade responses on
delegated to the President limited authority to reduce tariffs
Russia. The Administration also launched the regional
through proclamation in reciprocal trade agreements. As
Indo-Pacific Economic Framework for Prosperity (IPEF),
nontariff trade barriers grew, Congress adopted “fast track”
covering selected trade issues; supply chains; clean energy,
authority (now called TPA) in the Trade Act of 1974 to
de-carbonization, infrastructure; and tax/anti-corruption.
establish U.S. trade negotiating objectives and expedited
Other new efforts include a regional Americas Partnership
legislative procedures for consideration of implementing
for Economic Prosperity (APEP), a trade initiative with
bills on trade agreements, while preserving its constitutional
Taiwan, and dialogue with the UK. The talks currently
prerogatives. The most recent TPA, which Congress
exclude tariffs and some market access provisions.
renewed in 2015 (P.L. 114-26), expired in 2021. The Biden
U.S.-China Trade.
Administration has not requested TPA renewal, and has
China is an important market for the
pursued trade initiatives as potential executive agreements.
United States but poses major challenges. China’s statist
Potential TPA renewal could involve debates about U.S.
economic policies are of concern for Congress, as are the
trade priorities, negotiating objectives, and the effects of
market-distorting behaviors they incentivize. In 2018, the
trade policy on the domestic economy, firms and workers,
USTR, under Section 301 authority, determined that China
including the role of Trade Adjustment Assistance (TAA).
engages in forced technology transfer, cyber-enabled theft
of U.S. IP and trade secrets, discriminatory and nonmarket
World Trade Organization (WTO). The rules-based,
licensing practices, and state-funded strategic acquisitions
multilateral trading system is rooted in the WTO, formed in
of U.S. assets. USTR imposed tariffs on about $370 billion
1995, and its institutional predecessor, the 1947 General
of U.S. imports from China. China countered with tariffs on
Agreement on Tariffs and Trade (GATT). The GATT was a
$110 billion of U.S. products. Most tariffs remain in effect,
key element of the U.S.- and Europe-led post-WWII effort
with the status pending a statutorily required review by the
to build a stable, open, and prosperous global economy.
Biden Administration. A January 2020 bilateral agreement
WTO core principles include nondiscrimination and
addressed some of China’s IP and technology practices but
transparency. WTO agreements cover goods, services, and
left most issues to future talks. In response to China and
agriculture trade; remove tariff and nontariff barriers; and
other concerns, Congress has sought to boost U.S.
establish rules and disciplines (e.g., on intellectual property
innovation, production, and supply chain resiliency in
rights, IPR) and dispute settlement (DS). Stalled trade
strategic sectors; strengthen national security review of
liberalization efforts and issues such as developing country
foreign investment and export controls; and restrict U.S.
exceptions, concerns about noncompliance and adequate
imports and investment tied to PRC policies of concern.
enforcement of WTO rules, and ability to address
challenges posed by China’s
Potential Activity in the 118th Congress
statist practices have led WTO
members to call for reforms, including of the DS system.
In the 118th Congress, Members may deliberate on
Since 2019, the Appellate Body (AB) has been unable to
Congress’ role in trade policy vis-à-vis the executive,
hear cases, due to U.S. Administrations’ refusal to agree to
including on issues such as tariffs and trade agreements;
new jurists over concerns of alleged AB overreach. WTO
U.S. trade policy’s historic focus on liberalizing markets
members achieved key outcomes at their 2022 ministerial,
to promote economic prosperity, and how best to shape
such as on fisheries subsidies and a trade and IPR response
trade policy to realize congressional priorities;
to the pandemic, which some view as boosting the WTO’s
U.S. leadership in global trade, including in the WTO,
credibility, but many outstanding issues remain. The United
and in cooperation with others;
States and some WTO members have taken WTO-related
U.S. trade relations with major economies, and options
trade actions against Russia over its war in Ukraine.
to address concerns such as statist and unfair practices;
Trade Agreement Negotiations.
As WTO negotiations
trade issues with regard to technology and innovation,
have stalled or progressed slowly, bilateral and regional
labor, energy, the environment, supply chain resiliency
and diversification, and economic development;
trade agreements have proliferated, with over 350 in force
globally. The United States has 14 free trade agreements
enforcement of FTAs (e.g., USMCA); prospects for new
(FTAs) with 20 countries in force, with market access
agreements; alignment of executive trade initiatives with
provisions and rules usually exceeding WTO commitments.
congressional aims; and
the effectiveness of the current U.S. trade and
The Trump Administration made limited changes to the
investment policy toolkit in protecting the U.S. economy
U.S.-South Korea FTA, enacted a partial-scope agreement
from unfair practices and preserving national security.
with Japan covering some tariffs and digital trade, and
negotiated the U.S.-Mexico-Canada Agreement (USMCA),
Shayerah I. Akhtar, Specialist in International Trade and
which entered into force through implementing legislation.
Finance
USMCA replaced the 1994 North American Free Trade
Cathleen D. Cimino-Isaacs, Specialist in International
Agreement (NAFTA), with new provisions on digital trade
and state-owned enterprises, and other key changes, such as
Trade and Finance
increasing regional content requirements for autos. It took
Karen M. Sutter, Specialist in Asian Trade and Finance
steps to enhance trade relations within the Western
IF10156
https://crsreports.congress.gov
U.S. Trade Policy: Background and Current Issues
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